Advocating a Virtuous Voluntaryism

Does This Commenter Want To Revive Bimetallism? Greenbackism?

I have had someone called “Silver Account” posting on some of my articles recently. I want to post their comments and my replies, all of which have to do with the Gold Standard and the Federal Reserve. Judging from their chosen username and what they said, I would say they are somewhere slightly to the left of William Jennings Bryan on more than a few issues. That’s just fine by me, home grown American Leftism is usually preferable to most imported varieties, although I have developed a soft spot for mutualists of late.

Comment from my piece Why I Am Writing In Paul And Not Voting For Johnson:

She [a voter quoted in my article] should stay in it [voting this election] and vote for the president [Obama]. Real people know the repubs are being swayed by the racist teabags. Paul has a good idea, but the resultant people elected (repubs) would be a disaster for working folks.The banks would take your houses like in the 1890′s, women and blacks would not be able to vote. And the copper(aka, robber)-barons would be back in charge of owning (stealing) stuff. And the ignorant south would be worse-off than they are now. There would be no subsidies the blue states are giving them.

My response:

For Obama? I doubt she would even consider it. If only the Republicans WERE being swayed by the Tea Partiers! All they are doing is using empty rhetoric to get the Tea Party to vote for them. The Republicans were listening to half of what the Tea Party was saying, they would at least have some credibility. But even if they did all of what the Tea Party wanted, it wouldn’t truly be enough in my opinion.

I take it you are referring to the Long Depression (1873-1896) and the ill effects of the hastily adopted Gold Standard? The Gold Standard actually improved the overall economic situation, and this period was the best, economically that the country had ever known. Unfortunately, the implementation of the Gold Standard after so many years of fiat greenbacks made the situation of debtors even worse. This was unjust. But what bimetallists and silverites won’t tell you is that the same thing would have happened with a silver standard or a gold-silver standard, just to a lesser degree.

In any case, no Gold Standard (see this post) should be implemented from on high. Not only does this grant a monopoly to those who already have the most gold, but you may see a repeat of some of the goings on in the 1890s. You are correct on that count. That is why I support competition in currencies. Those whose debts are in fiat dollars won’t be forced into harder to pay off debts because they won’t be forced to use a gold standard currency. Commodity backed currencies will eventually beat out fiat currencies, but ideally at a slow enough rate that debtors in the fiat system won’t have their situation worsened. Everyone wins. No one is pitted against somebody else. Debtors, industrialists, lenders, depositors, etc. It is not a zero sum game.

And the women and blacks statement is absurd. No one jumps all over themselves, disgustingly so, to appease women and blacks more than the Republican party. Real racists and sexists will never have a real voice in the GOP. They can’t afford to be bludgeoned by the Democratic party. Besides, it was historically the Republican party that stood for equal rights for all races and genders, at the same time that they were the party of corporatism and corruption.

And for your information, the robber barons of today are much worse than the ones around the turn of the last century, and they are already in control. Most of the robber barons were monopolists and thugs, but at the same time, they brought many good things to this country, to all classes, races, and genders. Maybe not as good or as cheap as a more free system would have, but still faster than bureaucrats, populists, proletarian revolutionaries, or simply “nobody” could have.

The South is full of ignorant people to be sure, but no more so than most other regions. But you are on shaky ground to label an entire region or its entire population ignorant. The patronizing collectivism inherent in your statement is in fact responsible for most of the ignorance you allude to. Do you know why the South needs subsidies? Because it STILL hasn’t recovered from the Civil War. White and black alike are still suffering from Reconstruction, and exploitation from Carpetbagging Yankees. They are both kept on the two-party plantation. They have both been utterly destroyed by the public school system, in both the segregation and integration eras.

Comment from my piece Let Us Not Be Crucified Upon A Cross Of Gold:

The Fed’s performance since 1991 has been unquestionably superior to its record at any time since 1913. However, the larger, long-run question remains: Can the Fed as an “independent” central bank maintain price stability contrary to the wishes of an executive branch that seeks to use its fiscal powers to manage the federal government’s burgeoning long-term debt?

My response:

I am not sure what metric you are using to say the Fed is doing a good job, but I really beg to differ.

From 1913 (actually 1915) to 1917 was the Fed’s best era. This was before they were allowed to trade bonds, which is when the fiat currency really got off the ground.

Its policies from 1917 to 1919 led to two depressions, one lasting from 1920-1921 and the other 1929-1945. This latter Depression was the worse of the two, and obviously worse than anything we have experienced since. Having said this, the Fed’s main role was to trigger it. The length was more the result of the Federal Government’s reaction to the Depression, though the Fed did have something to do with it as well. Keynesians and Monetarists claim that the Fed didn’t expand the money supply enough. They are wrong. While contracting the supply of money would have its own problems, expanding it was what caused the problems in the first place. The best thing to have done would have been nothing, whether by the Federal Reserve or the Federal Government. During this period, the price of gold was fixed. One of the reasons the dollar didn’t collapse in this period is because gold (including that which was stolen from the American public) was used to prop it up.

But because price fixing eventually leads to shortages, this arrangement couldn’t last either. Hence Bretton Woods, which increased the flow of and access to gold. But just as before, this could only last so long. Shortage was still inevitable. At the same time the money supply was increasing. Hence the Nixon Shock.

As if the money supply wasn’t increasing at an insane rate before, taking the dollar completely off of gold only accelerated the process. Now the only thing holding the dollar up is its reserve status, something which coincided with the period between 1945 and now because of the United States’ increased influence after World War Two, which had greatly diminished the other powers.

Fed Policy didn’t really change much in these early years. But as it was no longer constrained by a scarce commodity, it could let lose. We saw the effects of this with stagflation, the dot com crash, and the housing crash. I put it to you that the Fed actions that caused these three things have only gotten worse since 1991, and continue to go down that path.

Price stability is only good in the short run or relative to increased prices. Decreased prices are not evidence of a recession, they are the result of deflation, which is a natural economic trend that has nothing to do with monetary policy.

The debt can not be managed. It can only grow until default. Default will occur whether hyperinflation happens or not. So you either have a default without Fed involvement (the better option) or default with Fed involvement (instead of just “austerity”, it will be austerity AFTER currency collapse).

Usury is technically charging interest on a charitable loan, not charging interest in general. Banks are not and should not be in the business of charity. Like any business, banks need a profit to continue running. Charitable loans, even if interest is charged, carry too much of a risk for banks to give out, unless the government bails them out (in fact, the government on the one hand pressuring banks and on the other hand promising to “insure” them, to lend to otherwise unworthy prospective home-buyers, was one such instance, and it was one of the causes of the recession we are in today). Nor should it be expected that, in general, the type of person in need of charity is the type of person who can repay a loan, let alone with interest. So, it is not even in a bank’s best interest to commit usury (i.e. give out charitable loans that bear interest). And the only reason it may be in a loan shark’s best interest is because his operation is not above board. If his client is unable to pay back the money, the loan shark just shoots him in the kneecap. Similar to what happens with gun control, if you outlaw interest, the only people charging it will be outlaws.

If you are in need (about to die of starvation, exposure, etc.), get a charitable loan from a friend or charity, no interest. If you can’t find one, and you are unable to pay back interest, don’t get a loan, as getting one would be tantamount to theft, even if you could pay back the principle. If you are able to pay back the principle, with interest, there are only two ways you could have gotten that money: investing the loan into something that gave you a return greater than the amount of the loan, in which case you are an investor, not someone in need; or you made money without the aid of the loan, in which case you were not really in need of the loan in the first place, as you evidently had other means of getting money.

Besides, interest is a price that aids in the allocation of resources. When there is a high interest rate, it discourages borrowing, which is just as well because the high price actually reflects the relatively low amount of savings from which to borrow. By the same token, a low interest rate (unless it is artificially set by Bernanke, et al) encourages borrowing, which is also just as well because the low price reflects the relatively high amount of savings from which to borrow. When the interest rate is artificially set higher or lower, the amount of borrowing will either be too little or too much for the amount of savings, which is a distortion that causes the misallocation of resources, such that when it comes time to bay back a loan and/or its interest, the borrower has not yet had a return on his investment or project.

Getting rid of the charging of interest would have the exact same effect as artificially lowering the interest rate would, except worse. That is because getting rid of interest is the same thing as lowering the interest rate to zero, which it is now close to. A low interest rate and the excessive liquidity that it is linked to is the primary cause of booms and busts, recessions and depressions.

What is the central banker’s chief crime? Some say it is that they try to commit “usury.” But in reality it is that they try not to! The easier it is for us (Whether we are in need or not) to get money, the less it is worth (which would not be problematic if it affected everyone and everything in the exact same way, in the exact same amounts at the exact same time) and the more the work ethic is destroyed (you have to work to earn money, and in a system that allows the charging of interest, you have to be able to earn money to borrow money for purposes other than being fed and housed charitably, for which there are charities already in existence without the government forcing every bank to become one or close their doors).

I read somewhere that in Islamic nations that follow monetary sharia laws (which forbid interest), it is hard for anyone (regardless of their situation) to get a loan because there is simply no incentive to hand out money unless there is an already established relationship. So criminalizing or discouraging the charging of interest may have the opposite effect of what is intended.

‘A is already rising’, ‘kof the long name’ is so many tiers above me I can hardly glimpse the soles of his feet. That said, I am rolling up my sleeves. I MUST reassert that I am basically playing devils advocate. What I argued in that piece are baby new thoughts and studies in my head. Until a couple of months ago this was communist ideation. So discussing with this learned man seems laughable, not only because I am ignorant, but also because I am trying to think OPPOSITE to my 45 years. That is of course Ayn Rand you see in my avatar. The most I can give at this moment (have cut, paste and will work on it in between schooling my kids today, and post soon) is that I communicated very poorly. I think we will find I end up with more questions, and a couple of clarifications. But don’t expect great money thoughts from this yogini. Lastly, thanks for turning me on to this blog!

Hi Kelly. You can call me Hank. I am by no means an expert in any field, but economics, particularly as it’s relationship to the state, may be my strong suit. It is only because of the long nights I have spent personal time studying these things.

I read your piece on usury, and I agree with you that it is a problem. I just define it differently. It is downright criminal that a $200,000 home costs $300,000 by the time the mortgage is payed off, but I don’t view this as usury so much as I do a risky practice. How can this risky practice said to be criminal? Because it is not just people capable of taking this risk, something they calculated to be better for them in the long run even if it costs them an extra$100,000, it is also people who are not really capable of taking this risk on their own but are propped up by implicit and explicit bail outs. So, there are other factors at work here besides the bank ripping someone off.

The fact is that home prices are absurd. And its not just because realtors and bankers have colluded to screw the little guy (there may be an element of this). I wouldn’t be surprised if a great deal of them knew that lower home prices would be better for business. But as you no doubt know, the prices were high in part because of the real estate and mortgage bubble, and continue to be high because after the bubble was burst, there was and still is an effort to blow it back up and keep it from deflating further. But recessions are a NECESSARY deflating of a bubble, and preventing this necessary but painful reaction to common sense-violating policies and practices only worsens it.

“Usury”, even in home buying may have been a problem before the housing boom, but why would home prices be so high that a lot of people have to take out loans they may not pay off in a generation. Isn’t the market supposed to make alignments? Why weren’t there any homes that average wage earners could afford? Could it be that in some places wages and profits are depressed (through taxation and regulation on homebuyers, realtors, and financiers), could it be that home prices are still in a bubble, even if it is not central-bank induced? Maybe the fact that people (not all, just enough of them) are all too willing to upgrade to a bigger house in a nicer neighborhood, when the house and neighborhood that, to quote Obama, are in their pay grade, would still suit them better, and take out mortgages to do so, also keeps home prices higher than they otherwise would be. So in a sense, many homebuyers, are enablers. You hear all the time that “The government is doing things that were an individual to do them, he wouldn’t make it.” This is true in most cases, and it gets the point across, but it is not always the case. My theory is that government can live outside of its means because there is an attitude amongst the people that they can. And that you will never force the government to be responsible if the people who “consent” to that government themselves refuse to be.

should have begun with my definition of usury. Back in January I had to look it up after reading ‘usury’ in a comments section !

I immediately interpreted usury (for the purposes of my blog) as any forced subjugation, any method or known ideation which operates to enforce and augment domination. From feudal systems to current taxation, I examined each epochs different economic structure and looked for unifying elements. There are tons of them. But the strongest and only one present throughout, was usury. So I tried to figure out how it’s happened repeatedly, particularly in our beloved Republic. This paper (http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf ) shows that we are much more controlled than at first appears So I set out to find out why. And glorified banking interest is all I could find that ran throughout. Tonight I watched the debate and ran each issue through what I’ve learned about usury. Initially the theory looks reasonable. But I also kinda hope I’m wrong because it takes away some of my own profit seeking mechanisms. I wonder if there isnt a way for us to practice anachro capitalism with competing decentralized currencies, bartering and maybe even mutual credit. I don’t know. I’ve just begun studying it. But I can give you a reasonable analogy of how it feels (feelings in the middle of an economic debate, I know ;)

Last night the kids and I were discussing slavery. One of them mentioned that slavery was as old as, well, humanity and usury :), But frustratingly, Southerners are blamed, or known, for slavery. The accurate truth in history should state that America is the country which ended legalized (again, glorified) slavery. It may still be in practice around the planet today (always was) but we should be given credit for tearing it down, not for having practiced it in the first place. And the analogy comes into play because I feel like the wife of a wealthy slave owner in 1850 trying to persuade her closest family and friends that not only is this trafficking in humans wrong, but that there is a BETTER way. If I’m sitting on my front porch in 1850 trying to feel my way into a better future at that point, what argument would I have? How would I know how much better it would be? Moreover, imagine the reaction of the other slave owners? My friends and family would send me to the ‘sanitarium’ for daring to question the source of all these ‘fine things’ that owning slaves enabled. (Btw, the philosophy is the only analogy, our current income is below the ‘federal poverty line’, whatever that means, we are more like cabin than plantation owners)
Well that’s how I feel about usury. That eventually we will discover a much better way, and be shamed we ever did it the ‘wrong’ way. But for now I feel like a traitor. I’m hunting around in the dark and hurting my own fiscal karma.
There is something wrong with usury. I’m just not smart enough to figure it out, yet.
Reveal everything, regulate nothing. Trade with all, alliance with none.
I am full of cliched bs tonight that won’t help at all in our current reality.
But you, Sir Henry, are a wealth of information. Again, so grateful I’ve discovered your site.

I love your analogy! If there is indeed a more moral way to conduct the things we supposedly need “usury” for, than the actual practice of usury, however you define it, then it is absolutely our moral duty to discover it and to use it to replace “usury”. And I think the best way to go about discovering this is by letting the Free Market of ideas decide winers and losers. Ayn Rand was correct when she said the moral is the practical, so given time, the most moral and most practical system, or at least near enough to it to be able to defend it and maintain it, will be found. One caveat on this is that not everything we think is practical is necessarily really practical, it is just that it is the most practical of all possible alternatives while the present immoral and impractical system continues to stand. But when it is finally brushed off and thrown into the ash heap of history, then will morality and practicality no longer be at odds.

This relationship might once again be destroyed by the greedy (who falsely think that more is to be gained in the long run by cheating and stealing, uncaught, which is only correct while an immoral and impractical system is already in place) and the lazy (who falsely think that it takes less effort to avoid work than it does simply to work, which is only correct when the greedy can gain by keeping potentially productive people unemployed and unproductive, again, something that can only occur while a dichotomy between the moral and the practical exists); and then dichotomized by the malicious and the ignorant.

I too wonder if in an Anarcho-Capitalist/Voluntaryist society, things we take for granted but are not too fond of, like taking out a time-sensitive interest-bearing loan, could be stamped out. In fact, I don’t doubt that they could. But such a monetary system could only exist if there was a high enough level of confidence in the other members of the community, who would be the backers of the currency in place of a high-valued commodity. There are only two ways to achieve this in my mind: through fiat (backed by force), which is a huge part of our modern currency system, and without which the dollar and a great deal many other currencies would collapse under their own weight; or if the community was small enough to where any diminishing in confidence reflects on specific persons (the bad apples of the community, as it were: the promise breakers, the contract breachers, the liars, the thieves, the abusers of trust and authority) rather than on the system itself.

Of course I favor competition in currencies, be they unbacked credit, commodity backed standards, or the dying fiat currencies of the world that could not compete without the aid of deceit (propaganda in the form of American Exceptionalism, Gross Domestic Product, Consumer Price Index, and a grossly underreported National Debt) and violence (overseas adventurism in the form of toppling dictators who want off the dollar and supporting dictators that promise to accept worthless dollars for their barrels of crude). May the best currency win!

Hank, your REPLIES are brilliant. Please for give me for taking so long to respond. I have a ‘good’ excuse as family medical emergency has taken me to Bali to be with my son.
I am most grateful for your ability to keep us all THINKING.